Isabella Carter
The U.S. Constitution outlines the federal government's responsibility to pay back debts, with Congress empowered to pay the debts and provide for the common defence and general welfare of the United States. This includes debts incurred during wars, such as the Civil War, and the validity of these public debts shall not be questioned. The Constitution's Debts and Engagements Clause also addresses financial obligations inherited from the Articles of Confederation, assuring creditors that the new government would honour these debts. The Fourteenth Amendment's Public Debt Clause further reinforces the government's commitment to upholding its financial obligations while prohibiting the use of federal funds to compensate former enslavers or pay Confederate war debts. The national debt enables the government to fund important programs and services, even during periods of decreased revenue, by borrowing money through various means such as Treasury bonds and bills.
| Characteristics | Values |
|---|---|
| Who is responsible for the debts? | The federal government |
| Who is exempt from paying the debts? | The United States and any State shall not pay any debt incurred in aid of insurrection or rebellion against the United States |
| What is the purpose of the debt? | To pay for important programs and services for the American public |
| What happens if there is a deficit? | The federal government borrows money by selling marketable securities such as Treasury bonds, bills, notes, floating rate notes, and Treasury inflation-protected securities (TIPS) |
| What is the national debt composed of? | Non-marketable or marketable debt, and debt held by the public or intragovernmental |
| What is the role of Congress? | To lay and collect taxes, borrow money, regulate commerce, and provide for the common defence and general welfare of the United States |
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What You'll Learn
The US Constitution's Public Debt Clause
> "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void."
The Public Debt Clause was inspired by the desire to ensure the obligations incurred by the government during the Civil War were honoured. It also served to protect the victories of the Civil War by prohibiting the use of federal money to pay the Confederacy's war debts or compensate former slave owners. The Clause has been interpreted as having a broader connotation, applying to the integrity of public obligations and government bonds issued both before and after the adoption of the Amendment.
The inclusion of a Public Debt Clause in the US Constitution was not a new concept. During the Revolutionary War, much of the fighting was funded through credit, and many creditors were not repaid. To assure these creditors that the new government would honour its obligations, the Articles of Confederation included a provision that pledged the United States and the public faith to repay these debts. When the Constitution was being drafted, there was a question of whether a similar provision should be included. Edmund Randolph proposed a version stating that prior debts "shall be as valid against the United States under this constitution as under the Confederation," which was approved by the Convention. This became the basis for the Public Debt Clause in the Fourteenth Amendment.
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Debts and Engagements Clause
The Debts and Engagements Clause, also known as the Public Debt Clause, is a provision in the United States Constitution that addresses the validity and repayment of public debt. The clause states that all debts and engagements entered into by the federal government before the adoption of the Constitution shall remain valid and be honoured.
The clause was included in the Constitution to assure creditors that the new government would honour the financial obligations incurred during the American Revolution and under the Articles of Confederation. The Articles of Confederation, which preceded the Constitution, included a similar provision that pledged to repay debts contracted by the Continental Congress.
The Debts and Engagements Clause states:
> "All debts contracted and engagements entered into, before the adoption of this Constitution, shall be as valid against the United States under this Constitution, as under the Confederation."
This means that any debts or financial obligations incurred by the federal government prior to the adoption of the Constitution would continue to be the responsibility of the government under the new constitutional framework. This provision was important in maintaining the credibility and stability of the new government in the eyes of creditors and the international community.
The clause also granted Congress the power to pay off these debts and provided for the common defence and general welfare of the United States. This power was quickly put into action by the First Congress, which enacted Secretary of the Treasury Alexander Hamilton's plan to settle the Confederation's debts and those of the individual states. After the federal government satisfied these financial obligations, the Debts and Engagements Clause became less of a topic of debate in American politics.
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Congress's Power to Pay Debts
The Spending Clause has been a subject of debate throughout US history, with key members of the founding generation disagreeing over the scope of Congress's spending powers. The Supreme Court addressed this issue in the 1930s, embracing a broad view of Congress's discretion to identify expenditures that further the general welfare. This broad interpretation has allowed Congress to pursue a wide range of policy objectives and shape the concept of "general welfare".
Congress's spending power also includes the ability to induce states to adopt policies that the federal government cannot impose directly. For example, in South Dakota v. Dole (1987), Congress conditioned federal highway funds on states raising their drinking age to 21. The conditions placed on the receipt of federal funds must be unambiguous and relate to the federal interest in national projects or programs.
In addition to its spending power, Congress also has the power to borrow money on the credit of the United States. When Congress borrows money, it creates a binding obligation to pay the debt as stipulated and cannot vary the terms of its agreement. This power is derived from Article I, Section 8, Clause 2 of the Constitution, which outlines Congress's borrowing and spending power.
The Public Debt Clause, found in Section 4 of the Fourteenth Amendment, further addresses the issue of public debt. It states that the validity of the public debt of the United States, authorized by law, shall not be questioned. However, it also specifies that neither the United States nor any state shall assume or pay any debt incurred in aid of insurrection or rebellion against the United States.
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The National Debt
The United States Constitution contains a Public Debt Clause, which states that the validity of the public debt of the United States, authorized by law, shall not be questioned. This clause was included to assure creditors that the new government would honour the financial obligations inherited from the Articles of Confederation. The U.S. Constitution also grants Congress the power to pay the debts of the United States.
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The Debt-to-GDP Ratio
The United States Constitution does not explicitly state who is responsible for paying back debts; however, it does recognise the validity of public debt authorised by law and outlines the Congress's power to pay debts.
Various debt-to-GDP ratios can be calculated, depending on the specific debt and GDP figures used. The most common ratio is the government debt-to-GDP ratio, which reflects the government's finances. Another common ratio is the total debt to GDP, reflecting the finances of the nation as a whole.
According to the IMF World Economic Outlook Database, as of April 2021, the United States had a public debt-to-GDP ratio of 132.8%, while two-thirds of its public debt is owned by US citizens, banks, corporations, and the Federal Reserve Bank.
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Frequently asked questions
According to the US Constitution, Congress has the power to pay debts and provide for the common defence and general welfare of the United States.
The validity of the public debt of the United States, authorized by law, shall not be questioned. This includes debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion.
The national debt enables the federal government to borrow money by selling marketable securities to cover expenses when spending exceeds revenue in a fiscal year. This ensures uninterrupted funding for important programs and services for the well-being of US residents.
The US Constitution includes the Debts and Engagements Clause, which addresses debts incurred by the states under the Articles of Confederation. The Clause states that these debts "shall be deemed and considered as a charge against the United States" and pledges the public faith in their repayment.
